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If there's none who will sell foreign assets, or borrow from the domestic country, then it means that foreign country is paying in domestic currency by borrowing from a country other than the domestic. Since, the foreign country is paying in domestic currency, to prevent a change in the exchange rate(in case of a fixed regime), the CB will accumulate the foreign currency.

However, what would be the need in the case of a flexible regime?

I think that the appreciation of the domestic currency, by the Marshall-Lerner effect, would decrease the trade balance, reducing the current account surplus. But I don't get why in this case the Balance of Payments should be zero...

Edit: In both cases, the CB could finance the government spending (including abroad spending), by issuing more money, and buying govt bonds.

If there's none who will sell foreign assets, or borrow from the domestic country, then it means that foreign country is paying in domestic currency by borrowing from a country other than the domestic. Since, the foreign country is paying in domestic currency, to prevent a change in the exchange rate(in case of a fixed regime), the CB will accumulate the foreign currency.

However, what would be the need in the case of a flexible regime?

In both cases, the CB could finance the government(private) spending, by buying govt(corporate) bonds, issuing more money.

If there's none who will sell foreign assets, or borrow from the domestic country, then it means that foreign country is paying in domestic currency by borrowing from a country other than the domestic. Since, the foreign country is paying in domestic currency, to prevent a change in the exchange rate(in case of a fixed regime), the CB will accumulate the foreign currency.

However, what would happen in the case of a flexible regime?

I think that the appreciation of the domestic currency, by the Marshall-Lerner effect, would decrease the trade balance, reducing the current account surplus. But I don't get why in this case the Balance of Payments should be zero...

If there's none who will sell foreign assets, or borrow from the domestic country, then it means that foreign country is paying in domestic currency by borrowing from a country other than the domestic. Since, the foreign country is paying in domestic currency, to prevent a change in the exchange rate(in case of a fixed regime), the CB will accumulate the foreign currency.

However, what would be the need in the case of a flexible regime?

I think that the appreciation of the domestic currency, by the Marshall-Lerner effect, would decrease the trade balance, reducing the current account surplus. But I don't get why in this case the Balance of Payments should be zero...

Edit: In both cases, the CB could finance the government spending (including abroad spending), by issuing more money, and buying govt bonds.

If there's none who will sell foreign assets, or borrow from the domestic country, then it means that foreign country is paying in domestic currency by borrowing from a country other than the domestic. Since, the foreign country is paying in domestic currency, to prevent a change in the exchange rate(in case of a fixed regime), the CB will accumulate the foreign currency.

However, what would happen in the case of a flexible regime?

I think that the appreciation of the domestic currency, by the Marshall-Lerner effect, would decrease the trade balance, reducing the current account surplus.

If there's none who will sell foreign assets, or borrow from the domestic country, then it means that foreign country is paying in domestic currency by borrowing from a country other than the domestic. Since, the foreign country is paying in domestic currency, to prevent a change in the exchange rate(in case of a fixed regime), the CB will accumulate the foreign currency.

However, what would happen in the case of a flexible regime?

I think that the appreciation of the domestic currency, by the Marshall-Lerner effect, would decrease the trade balance, reducing the current account surplus. But I don't get why in this case the Balance of Payments should be zero...